Tags: Loews | L | conglomerates | stocks

Loews Hedges Disaster Losses with Oil Success

By Forrest Jones   |   Monday, 12 Sep 2011 10:56 AM

For Loews Corporation (L), a conglomerate with stakes in insurance companies, hotels, and oil and gas concerns, the natural disasters of 2011 will soon be a bad memory. Springtime storms in the United States and the devastating earthquake and tsunamis in Japan earlier this year dealt a blow to company earnings, especially at its property and casual insurance unit, CNA Financial Corporation.

For the second quarter of 2011 ending June 30, net income fell 31 percent to $252 million. Revenues rose 2 percent from the second quarter of last year to $3.5 billion.

"Net income decreased primarily due to lower favorable net prior year development recorded by CNA Financial Corporation in 2011 than in 2010, as well as higher natural catastrophe losses in 2011," the company says in an earnings report.

Higher earnings at Diamond Offshore Drilling, an offshore oil and gas unit, managed to offset losses generated at CNA Financial, the company says.

Looking ahead

Wall Street is looking beyond the earthquake. In March of this year, FBR Capital downgraded the stock to market perform from outperform and, upon review later in the year, the bank decided to stick with the recommendation.

Other Wall Street firms stuck to the middle ground. In May, UBS initiated coverage with a neutral recommendation while Barclays Capital reiterated its equal weight recommendation in July. In late August, RBC Capital Markets reiterated an outperform recommendation

Ratings agencies like Loews. In a recent report on insurance subsidiary CNA Financial, Fitch Ratings said the company was in good hands, giving the unit a stable outlook.

"Fitch's rating rationale continues to recognize Loews' ownership of CNA, as the company benefits from the financial flexibility of a strong majority owner and is able to manage the company with a more long-term approach," Fitch analysts write in a report on CNA.

"Loews has demonstrated its support of CNA over the years through various actions that have improved CNA's capitalization. Fitch views Loews' continued commitment as a critical factor in serving as a support floor for CNA's current ratings," Fitch analysts add.

LoewLoewLoews Corporation should issue third quarter earnings around Nov. 1.

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For Loews Corporation (L), a conglomerate with stakes in insurance companies, hotels, and oil and gas concerns, the natural disasters of 2011 will soon be a bad memory. Springtime storms in the United States and the devastating earthquake and tsunamis in Japan earlier this...
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